All Forum Posts by: Zane Belden

Hi all,

I have clients looking to 1031 exchange. They are selling small multifamily in CA and looking to buy in metro Phoenix. Price range will be somewhere in the $1.5-2.5M range. Please send me anything you think could be a potential fit, especially anything off market or coming soon. They are looking for more updated/turnkey, not looking for a big value add rehab project, but maybe willing to do a little work.

Thanks!

Zane

@Lee Ripma Thank you for weighing in! We are open to other partners including other syndicators, we just haven't gone down this road yet.

@Taylor L. Exactly. We've held off on going the securities attorney route but it may be time to and allow outside accredited investors in our deals.

@AJ Shepard I don't think they are actually getting 100% but they've been surprised (so have we) at how normal and strong collections have been despite Covid and the no eviction order. Thanks for running the numbers, overall, you're right on where we've been calculating. We are fortunate that we have the property under contract for $2.6m, so we would love to be able to come up with the full 1.1m to make it happen.

@Taylor L. Thanks for the feedback and questions!

$654 is the current average on these units. They aren't in rough shape but are in need of cosmetic rehabs. Newly renovated units on the same street in identical floorpans are getting $795-800, and are getting rented quickly. This is the exciting, value add portion of the deal.

We are syndicators, with our 8 unit and 24 unit deals having close friend and family as passive partners. But our circle of partners is getting a bit tapped out, thus only having $300k raised. We are certainly up for advice on the different options to come up with the remainder and what makes the most sense given our circumstances. Maybe thats a private loan, another syndicator partner? We're open to ideas because this seems to really pencil out well.

Thanks!

Zane

Love some feedback, thoughts, comments on this:

We have this 52 Unit under contract. It seems as though we are in a bit of a potentially unstable market when considering, Covid-19, Election, no evictions, population decrease in the county and state this is located. But the numbers still look solid....

Highlights:

52 units over 6 buildings. (46) 2 bed/1.5 bath townhouses and 6 apartment flat stye averaging 971 sqft. Brick exteriors, sloped, shingle roofs)

Gross Annual Rents: $408k ($654/unit/month). Gross Annual Expenses: $190k (prop taxes are $56k/year, trying to find out if they will increase substantially upon purchase).

Tenants Pay: Electric, Water, Sewer

Currently 100% occupied and we're told near 100% collections even though landlords are subjected to the no eviction order.

The Business plan: Purchase, cosmetic rehab 25 of the 52 units @$12,000/unit ($300k). Raise rents. Cash-out Refi.

With the property being 100% occupied, we will execute the 25 rehabs fairly slowly over 2-2.5 years and target the cash out refi in year 3-3.5 once rents have been pushed up.

So, the million dollar question: what would be a good price to pay for this property and should we buy it???

Other important notes: 

- We tentatively have financing in place: 4.25%, 25% down, 20 year amortization, 3 year balloon. 

- We only have $300k cash currently collected. Not nearly enough for both downpayment, closing costs and the $300k renovation budget (need about $1M).

- We have the option to buy less buildings/units if we can't secure financing for the complete purchase/can't come up with enough down.

-We have a seasoned/reputable Pm lined up to manage and we already own 40 units in the area over 3 properties.

Thanks all in advance for the wisdom and feedback!

Zane

@Marlen Weber Thank you!!

@Jeremy Moyer Thanks, we've definitely learned a lot through this deal and we're excited to buy our next property and continue to scale. I think our deal structure is a fair reward for both our passive investors and us managers. Hope to continue the relationships and grow wealth for our partners for many years. The snowball is growing!

@Caleb Brown Thank you!!

@John Bonhomme Hi John, thanks for following. It was an ugly duckling when we bought it but our vision is starting to take shape.

Great question! Now that we're finishing up the renovation phase, I think it's time we go back and make that comparison. We had been lagging pro forma not he income side and under budget on the expense side. I think we've close to caught up on income, actual vs pro forma. We've had a few unit renos go over budget but our general CAPEX and R/m has been well under budget. When you completely renovate 19 out of 24 units, I guess we should have anticipated lower R/M in the early going.

I'll follow up with a more concise answer once we've made the side by side comparison.

Thanks,

Zane
 

@Jeremy Moyer Hi Jeremy, thanks for following this. Our partners are equity partners and will maintain their equity position until we liquidate. We won't know for sure how much capital we will distribute after the cash out refi until the appraisal comes in. But based on where it appraised at purchase and where we are now, I do think we have the potential to return close to all invested capital after the refi (which will be awesome!:) After that, everyone matins their equity positions and we will move into the holding phase and paying out smaller (probably quarterly) distributions from cash-flow. We are always commuting if our investor group and will be discussing whether to sell at some point or continue to hold. ON this property, I could see us holding 5+ years after the refi before considering to sell or refi again.

Investment Info:

Large multi-family (5+ units) buy & hold investment in Carterville.

Purchase price: $720,000
Cash invested: $275,000

Contributors:
Devin Haertling

24-unit value add apartment complex across 6 buildings. All 2 bed, 1 bath. Plan to renovate 18 of the 24 units, improve exteriors, etc and raise rents. Once this is complete we will cash out refi or possibly look to sell.

What made you interested in investing in this type of deal?

Outdated cosmetic interiors leading to very low rents made this investment an ideal value add through unit interior renovations.

How did you find this deal and how did you negotiate it?

Local agent

How did you finance this deal?

Financed through local bank, 20% down. Raised funds to close and execute renovation plan through friend and family investors who had expressed interest in partner on future projects with us.

How did you add value to the deal?

Significant unit interior remodels (19 out of 24 units) and minor exteriors/landscape updates.

What was the outcome?

We are currently renovating unit #19 out fo 24. We have raised rents significantly and are planning a cash out refinance in early 2021.

Lessons learned? Challenges?

Negative property stigma can hold back initial unit renovations from getting their full rent potential. But once you renovate enough units and get enough new, higher paying tenants, there seems to be a break over point where the property stigma changes and the higher paying tenant base becomes the norm. Always ahem to find and use good subs for renovations.

Investment Info:

Large multi-family (5+ units) buy & hold investment in Carterville.

Purchase price: $720,000
Cash invested: $275,000

Contributors:
Devin Haertling

24-unit value add apartment complex across 6 buildings. All 2 bed, 1 bath. Plan to renovate 18 of the 24 units, improve exteriors, etc and raise rents. Once this is complete we will cash our refi or possibly look to sell.

What made you interested in investing in this type of deal?

Value Add, under market rents, poor management.
Cashflow, forced appreciation, market appreciation, depreciation,

How did you find this deal and how did you negotiate it?

Agent/PM found it. Negotiated with seller for several months until we made a plan to meet both sides objectives.

How did you finance this deal?

Conventional mortgage. 20% down, 4.75, 5 year ballon, amortized over 20

How did you add value to the deal?

renovating units, raising rents, better tenant placement/management

What was the outcome?

closed on 3/15/19: 7 units renovated. Significantly raised rents on new and old units. gross income increasing every month.

Lessons learned? Challenges?

Building/property stigma! Didn't realize how negative the stigma was. New signage and getting a lot of people in to see newly renovated units and the word of mouth the tame form that helped changed the stigma. But it took a few months to get over the hump.

@Caleb Heimsoth

Yes, I’m from southern IL and recently moved to AZ. And my business partner, @Devin Haertling, still lives in southern IL as our eyes on the ground.